Eurozone contemplates separate budget, new FTT tax

Brussels
-
A kind of Soviet-style centralized economy could replace the current EU Treaty, creating a separate, unified "single budget" for the 17 countries sharing the euro.

As the EU summit draws near, the conceptual single-budget proposal, including a new transaction tax, is being widely acclaimed by northern European countries, including Britain, Denmark, the Netherlands and Finland, according to a Sunday Reuters report.

"I wouldn't say that there was strong support for it, but there was certainly a feeling that this is an idea that should be explored in more detail," said one diplomat briefed on a recent discussion that took place between eurozone leaders.

The centralized, single budget proposal was first laid out by Herman Van Rompuy, the president of the European Council. In a document published in September, Rompuy proposed the single budget concept to stimulate debate about how Europe's monetary union could be strengthened.

Van Rompuy’s idea involves creation of a "fully fledged fiscal union" among the 17 countries that share the euro under a single treasury office and "a central budget whose role and functions would need to be defined."

While there is no definition of what would constitute a “single budget, or what the ramifications are to sovereignty and national commerce, Germany and France have both signaled their approval of the concept as an ultimate direction towards attaining greater eurozone solvency.

New taxes are being proposed as a way to pay for the single budget. Germany and France are already hyping a financial transactions tax (FTT) that would be implemented among nine euro zone nations, which is considered the minimum required to gain quarry.

"There will come a time when you need to have two European budgets, one for the single currency, because they are going to have to support each other more, and perhaps a wider budget for everybody else," British Prime Minister David Cameron told the BBC on Sunday, the first day of his Conservative Party's annual conference.

"I don't think we will achieve that this time, but it is an indicator of the way that Europe is going," he said.

Some officials have reportedly implied that it could involve each country setting aside 0.3 or 0.5 percent of their GDP for a communal budget while others disagree.

"The modalities are completely unknown," said one EU official when asked how a single budget might work, according to the report.

Even if FTT and the single budget proposal are discussed rigorously at the October 18-19 summit, it would likely take years to implement either, even if everyone supports it.

The proposal would mean making fundamental changes in how the eurozone is administered and even changing the EU treaty, which is indicative of an extended and divisive debate.